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The Loonie’s price action was a mixed bag of beans last week. Will we see a more uniform price action this week? Here are the possible catalysts.

CPI reports (Jan. 18, 1:30 pm GMT)

Canada’s consumer prices slowed down to an annualized increase of 1.7% in November, the weakest since January 2018, following a 2.4% uptick in October.

Turns out, the decline in gasoline prices had slowed down the cost of transportation.

The “miss” didn’t really faze Loonie traders, as all eight components still showed price increases and Bank of Canada (BOC)’s core figures juuuust missed market’s estimates.

This week analysts see the monthly reading at -0.3% (vs. 0.4% in November), while the annualized figure is expected to maintain its 1.7% increase.

BOC’s Poloz and his team sees inflation at “around 2 percent” within the next two years, so any significant drop in prices could weigh on the Loonie.

Market risk sentiment

As you can see below, CAD relied on its countercurrencies’ catalysts in the absence of direct catalysts from Canada.

Aside from oil price movements, you should keep an eye out for other potential market-movers such as the Brexit drama, China’s weak economic reports, and a bit of profit-taking from last week’s U.S.-China trade negotiations for clues on where the major CAD pairs will go.

Last Week’s Price Review

Canadian dollar pairs were a mixed bag to end the week long as global risk sentiment fought with this week’s Canadian economic data and events.

Overlay of CAD Pairs: 1-Hour Forex Chart
Overlay of CAD Pairs: 1-Hour Forex Chart

Major Market Drivers for the Canadian Dollar

The Canadian dollar started the week off on the right foot, broadly higher against the majors likely due to early week positive U.S.-China trade talk developments and on the surprisingly positive Ivey PMI showing strong economic activity in Canada.

But the rally didn’t last too long as traders paused ahead of the Bank of Canada monetary policy meeting and presser, which turned out to be a bit of a mixed bag as the BOC held interest rates but Governor Poloz signaled that more hikes may be needed even with low oil prices and a weak housing market.

From here, we started to see price divergence between CAD pairs as AUD & NZD continued to rally on rising global risk-on sentiment, GBP gets a bid off of a potential delay in the Brexit vote, and the Loonie crushes safe havens off of global risk sentiment and likely a very, very good week for oil prices.

Oil vs USDCAD inverted 1-Hour Forex Chart
Oil vs USD/CAD inverted 1-Hour Forex Chart

Canadian Headlines and Economic data